Lufthansa: Going Global Essay

Lufthansa Aviation group has establish a worldwide leader in the air hose fabrication with several powerful business segments, inclusive of a passenger airline component, business component, logistics, MRO catering and IT services. The aviation success has been largely due to their focus on quality, innovation, safety and reliability. Head quartered in Germany, Lufthansa has lead the pack with imply to international airline business. The Aviation Groups supranational Business Strategy has evolved to that of a corporeal level transnational dodge, whereas there is a sh bed imaging to achieve spherical efficiency yet effort to lastingnessen its local responsiveness in Germany (Hitt, 2009). unembellished with the strategicalalal all(a)iance with Star bond, the development of Lufthansa Regional serves as a local response formulation of a low- cost carrier, in addition to the modernizations of various passer hubs and welcome lounges throughout the major come across traffic hubs located in Germany.This international business strategy is considered a combination of multi domestic and global strategies (Hitt, 2009). A transnational strategy uniquely offers the benefits inherent in both global and multi-domestic strategies under this strategy each business component of Lufthansa can successfully exercise independent innovation given its modify building.Lufthansa understood azoic, the benefits and advantages of international expansion evident through post WWII with fails to various countries (Lufthansa, 2010) later the formation of an strategic attachment with Star union, which serves a global airline network. Star Alliance was established in 1997 with Lufthansa cosmos one of its core founding atoms. Despite industry ups and downs related to international travel through the early 1980s with the Iraq war, and then the frightening threat of terrorism post September 11, 2001, Lufthansa detained optimistic as did the oddment of the airline industry , and responded to globalization appropriately. The majority responded in a like manner forming alliances in an effort to get by with the newly entered No-frills and lower cost competitive airline flights offerings.Competition of this kind, along with slow retrieval of international travelers, increase in gas prices the constant pressure toreduce pricing govern to remain competitive has taken a toll on the entire industry oer the last decade. Lufthansas also crafted Lufthansa Regional which accounts for 50 percent of the Aviation groups German and European flights. This on the whole owned subsidiary is entirely owned and controlled by Lufthansa the parent company, and was established to meet the need of low-cost carriers. Within Lufthansa Regional, exist Eurrowings and the partly owned City line. Through this development Lufthansa can offer a lower cost airline and reap the benefits of passengers opting for this Intercontinental airline versus going to a larger hub. Lufthansa em ploy an acquisition strategy with the accumulation of SWISS AIR in 2005, a strategic move to h senile back the competition British Airways and One World Alliance to seize the opportunity.The strategic alliance with Star Alliance was a concerted accommodative strategy to provide customers worldwide reach and a smooth travel experience (StarAlliance,2010). This remains as a shared objective for Star Alliance, Lufthansa and the other members of this alliance. It is understood that it is comparatively impossible to survive in a global network outside of an alliance. This cooperative strategy serves as a mechanism for the Aviation Group to enter the market swiftly, and with greater impact with the support of the alliance. The airline industry has historically been a standard cycle market, the same is true with this alliance thus allowing for savings and benefits to extend across its members (Hitt, 2009). The addition of Air China and Shanghai Airlines added as members, serves as a ful l-blooded example of Star Alliances capability to assist in global expansion for all its members and a unique opportunity to tap into a market that would be quite challenging if try independently.This strategic network serves as a valuable cooperative arrangement to take place between the 18 members at heart the Star Alliance. This alliance allows for the sharing of cooperative relationships with stakeholders, customers, suppliers and competitors (Hitt, 2009). Air carriers normally participate in multiple horizontal complementary alliances this is demonstrated with the relationship between Star Alliance and Lufthansa. However, these type of business-level cooperative strategies present challenges with scholarship of loyalty, and speculation of illegal collusive activities this feeds into the discussionof other risk of infections.Lufthansa has faced some clangoring with regard to reservation compromises counter to its goal. However the use of the cooperative strategies such( prenominal) as the alliance create with Star Alliance proves reasonable given the high uncertainty of the industry and risk associated with pursing growth opportunities independently. It is comfortably important to evaluate these uncertainties and challenges when pursing business outside of the national boundaries. The risk of a network cooperative alliance such as Star Alliance carries the risk of opportunistic behavior. What may endure initially been viewed as a partnership, could become compromised with potential for failure due in part to a false perception of trustworthiness amongst members. (Hitt, 2008)Additional risk, may also include misrepresentation full disclosure of what each member can bring to table and imbalance of alliance-specific investments as detailed with the example partnership of Disney and Pixar indoors the text. With regard to Lufthansa and its compromises counter to standards, these challenges were revealed in the case study and make mention of compromi ses make throughout the years trail counter to the tillage of Lufthansa. An important example of this was the mention of the IT component, and the belief that the customer interfacing with electronic check in completion was less than desirable, and not in alignment with the Lufthansa standard with response to customers. However, collaboration of Star Alliance IT infra anatomical structure would rob Lufthansa IT transcriptions of their customers (Hitt, 2009).Consideration of current globalization trends and future efforts of the airline industry must be evaluated operating outside of national boundaries. An abbreviation of the varying favorable culture and institutional attributes of global markets learn evaluation. strategic leadership involves the analyzing of the environs in order to identify and an anticipate changes and trends that are likely to occur. An analysis instruction on strengths, weaknesses, threat, and opportunities (SWOT), should be conducted in order to pr operly evaluate the industry environment. The risks associated with operating beyond national boundaries or Germany as in the case with Lufthansa would benefit from evaluating a competitive amaze such as the five repulses competitive model as a method of gaining knowledge about the industry inclusive of Threats of new entrants, Bargaining power of suppliers, Rivalry among competing firms, Threat of substitute product, and Bargaining power of buyers (Hit, 2009)The evaluation of the governances structure and controls of Lufthansa indicate a great deal of complexness that requires extensive oversight. Given that the organisational structure is the foundational support for the brass and specifies the organizations formal reporting relationships, procedures controls, authority and decisions making aspects it is imperative that the structure is solid but with room for flexibility as changes arise.The case study touches upon the six business lines within Lufthansa and the strategic mi ssion of the organization to unite every aspect of the organization under one strategy roof. The Aviation Group has streamlined much of its endeavors inclusive of the dissolving of the once integrated cooperation. Strategic controls of this nature include improving the flow of colloquy between counsel and front line employees and translating the over arching values of the organization into leadership values. Providing a degree of accountability, to every employee with targets, and dialogue with management about their endeavors through an annual evaluation. There is an aggressive effort to restructure the business model focusing on cost cutting and streamlining anything that may be impacting the cash flow significantly. Strategic and Financial controls are necessary to maintain a balance within the organization, thus the use of a balance stigma card would be ideal.This score card would serve as a check and balance system between what the organization has set out to accomplish and strategic and financial controls used to assess their performance. The old adage if you cant measure it, you cant manage it lends to the legitimacy of using such controls. An example of such a financial control for Lufthansa was the elimination of discounted tickets used by independent travel agencies and promotion of direct booking using the internet or call centers. Financial operating goals have become a high priority with a direct focus on intervening in areas which impact the cash flow. Lufthansa has demonstratedgreat resiliency given its financial crises during the 1990s, now holding a appointed investment grade rating. Given that experience the organization is prepared to implement controls in order to maintain financial discipline in dodge of succumbing to financial failure.Improving the organizational structure requires making a significant investment in its Human ceiling this agency developing the leadership skills of individuals within the organization. Many believe t hat the human element in any organization is most important. The word Capital is typically referred to as an asset that can be utilized in the production of more wealth. accordingly investing in what one would consider as its most valuable assets human capital , productiveness is likely to increase. Lufthansa should begin with an organization wide initiative aimed at restoring the trust and loyalty of its employees.There is such a rich history of Lufthansa dating back to the 1930s and employees should be re approximationed of this history built on quality and pride at one time to be a Lufthanseat. The message of value i.e. corporate values, and how valuable every employee is, can be incorporated into the current town halls held and worked into the corporate university curriculum. The organization has become quite complex with the many subsidiaries, strategic alliances and acquisitions that perhaps the employees doing the front line work feel leftover out of the loop. There should be a financial investment made in providing effective teach and development programs tailored to every employee within the organization. Every employee within an organization can benefit from go on education and learning opportunities.Continuing learning and leveraging the firms expanding knowledge base are linked with strategic success (Hitt, 2009). A concerted effort by management and workforce education professionals should be made to development up and coming managers and future leadership. Developing relationships inside and outside of the organization inclusive of those organizations partnered with enhances the social capital of the organization. Given the competitive nature of the job airline industry, it would prove advantageous for Lufthansa to use their strategic alliances to foster their social capital positively.It is inconceivable to envision an organization reaching is maximum potential without cultivating its organizational culture and defining its mission and visio n. The case study divulges occurrences where the workforce has become fragmented with varying interests, perceptions, communication channels and expectations. This is evidence that the organizational culture inclusive of ideologies, symbols and core values must be communicate and strategically in alignment with the vision of the organization (Hitt, 2009). Competencies can be derived and influenced by the organizational culture in order produce desired outcomes. The culture of the organization should positively impact its workforce, fostering an environment of innovation, transparent communication and trust, and in the case of Lufthansa a commitment to quality and upholding of standards.Strategic Leadership means focusing on incremental changes, with celebration of small success to maintain the momentum of the cultural change. evanesce leadership must fully buy-in to the cultural change endeavors in order to ensure its success. The selection of management and employees at all level with an intrinsic desire to contribute to the organization in a positive manner is important. There should be a sincere desire to act responsibly and ethically and avoidance of opportunistic behavior and other behavior which could destructive to the culture of the organization.A positive organizational culture feeds an entrepreneurial spirit and opportunities within an organization. The importance of entrepreneurial opportunities cannot be under stated. This entrepreneurial-state of mind facilitates the energy and ecstasy necessary to promote innovative out of the box thinking. The freedom of expression, sharing of ideas, and asking the Why questions is staggeringly valuable to an organization such as Lufthansa and any organization interested in competing globally. The five dimensions of autonomy, innovativeness, risk taking, proactivenesss and competitive aggressiveness should be capitalized upon throughout training initiatives and encouraged in order to create an entrepreneurial mind set work force. The workforce should be challenged to come up with better, faster more economic was of accomplishing tasks or streamlining processes, and recognized by Lufthansa Leadership for doing so.Lufthansa has expressed and exercised a number of initiatives aimed at reducing complexity of its organization. The dissolving of business segments and evaluation of process improvement strategies all serve as advances towards building an organizations model in alignment with business simplicity versus that of complex nature. Lufthansa can experience tremendous simplicity in appropriately managing the various business elements within the organization by acquiring a global mind set, and providing flexibility to address the need of each segment. An in depth look at core competencies and step of how much value each segment is contributing to the overall success of the organization and how the internal characteristics of the organization measure up to the competition meeting th e needs of the customer is a great starting place. The environmental uncertainty of the airline industry and other customer base for the varying business units does increase the complexity and range of issues to consider when evaluating the internal environment (Hitt, 2009) however, it is essential in order to understand the organizational complexity in its entirety.Ashbys Law of Variety suggests that organization can handle high external complexity on by a similar internal complexity (Hitt, 2009). Recommendations regarding the reduction of complexity are as follows Development of a unified vision that is shared across the organization, in an effort to eliminate the mutation of values, aims, cultures and types of behavior. A shared global strategy communicated throughout the organization in the fulfillment of a common goal. Education regarding the benefits of a culturally diverse workforce recruitment of a diverse work force with varying ethical and professional backgrounds yet com mitted to the success of Lufthansa and a shared vision. Standardizing of processes and norms throughout the organization Lufthansa possess the organizational know how and strategic leadership to face future uncertainties of the airline industry. It has proved its strength and resiliency in its survival of a turbulent industry and shows promising potential despite uncertainties regarding global warming issues. Here education is key and it would be advantageous for Lufthansa to continue fostering positive social relationships with environmental agencies and other social activities.